Written Commentary
CRUDE OIL
Despite a very bullish $100 price forecast emerging following evidence the Russians are moving to reduce production to comply with OPEC+ promises, oil prices are starting out under pressure today. Clearly, yesterday afternoon’s surprise massive jump in API crude oil stocks of 9.33 million barrels serves to aggressively offset “potential” supply disruptions from several global supply chokepoints. In fact, the massive jump in US crude supply in the face of a virtual explosion of US refinery activity over the last month suggests the US is more than capable of providing marginal oil supply to the world market. However, trade action could remain narrow today with the trade not expecting a change in policy from next week’s OPEC+ meeting and with many outside market forces in limbo today because of key US inflation data tomorrow. Obviously, US crude oil inventories will dominate this week’s reports, with the deficit to year ago levels last week becoming very significant at 36.1 million barrels! With expectations calling for crude oil inventories to decline by 1 million barrels and given expectations of another increase in the refinery operating rate of nearly 1%, demand for crude oil in the US is likely to remain strong.
NATURAL GAS
Fundamental resistance continues to stack up in natural gas with the temperature forecast into the beginning of April projecting US heating degree days to run 8 degree days below normal. Certainly, the market may see expiration of front month contracts and the roll as a temporary lift but given the presence of the “heart of the shoulder season” soft demand should be expected to extend. In positive news for the bull camp, despite last week’s surprise injection to inventories, this week’s Reuters poll has a range of forecasts for the EIA inventory report calling for declines between 24 and 32 BCF. In the end, the path of least resistance is down with the latest net spec and fund short suggesting the market retains selling potential.
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